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CGI Federal Inc. v. FCi Federal, Inc.

Supreme Court of Virginia

June 7, 2018





         This appeal involves claims for fraudulent inducement, breach of contract, and unjust enrichment related to a teaming agreement entered between FCi Federal, Inc. ("FCi") and CGI Federal Inc. ("CGI") to obtain a federal government contract. The jury awarded CGI approximately $12 million in damages for the fraudulent inducement and breach of contract claims. After determining that the teaming agreement did not obligate FCi to extend a subcontract to CGI and that CGI did not prove fraud damages, the circuit court set aside the jury's verdict. The circuit court then granted FCi's motion for summary judgment on CGI's alternative claim for unjust enrichment. On appeal, CGI contends the circuit court erred in setting aside the verdict and entering summary judgment for FCi on the unjust enrichment claim. Concluding there is no reversible error in the judgment of the circuit court, we affirm.

         I. Facts & Proceedings

         When a circuit court grants a motion to set aside a verdict, we grant the party for whom the jury found the "benefit of all reasonable inferences that may be drawn from the evidence and of all substantial conflicts in the evidence." Stover v. Norfolk & Western Ry. Co., 249 Va. 192, 194, 455 S.E.2d 238, 239-40 (1995). We recite the facts in accord with these principles.

          A. The Original Teaming Agreement In 2012, the United States Department of State solicited bids for a visa processing contract ("visa contract" or "prime contract"). CGI, as a large contractor, was ineligible to bid because the State Department reserved the visa contract for small businesses. Although FCi, as a smaller contractor, was eligible to bid for the visa contract, it did not have the capabilities to perform the work alone. Unable to compete for the visa contract individually, FCi and CGI agreed to cooperate in submitting a proposal for the visa contract. To that end, the parties entered a teaming agreement on September 19, 2012 to prepare a proposal for the visa contract. The teaming agreement set forth FCi's and CGI's rights and obligations in preparing the proposal.

         Under the teaming agreement, FCi was required to submit a proposal as the prime contractor and include CGI as a subcontractor. By entering the teaming agreement with FCi, CGI was prohibited from assisting any other parties competing for the visa contract. CGI committed to furnish "personnel, information, and materials as necessary" and "to assist FCi . . . in developing and preparing sections of the prime proposal." CGI also promised to provide "cooperation as may reasonably be deemed necessary or desirable by FCi . . . to ensure the success of the" visa contract proposal. Under Section 2.0 of the teaming agreement, FCi "retain[ed] express and exclusive control over all prime proposal activities . . . as well as negotiation of any resulting prime contract."

         From the outset, CGI determined it wanted at least 40% of the work available under the visa contract ("workshare") or its participation in the teaming agreement would not be worthwhile. Accordingly, the parties negotiated a "Statement of Work, " labeled as Exhibit A of the teaming agreement, which provided, "Subject to the final solicitation requirements, [CGI] will receive forty-five percent (45%) work share of the total contract value . . . but the work share commitment may not be exactly 45% each year."

         If the proposal resulted in a contract award to FCi, the teaming agreement provided a framework for the parties to negotiate a subcontract. For example, Section 3.1 of the teaming agreement required the parties to "enter good faith negotiations for a subcontract . . . subject to applicable laws, regulations, terms of the prime contract and . . . [CGI's] best and final proposal to FCi." Section 3.2 of that agreement, in turn, reiterated the "contemplated subcontract" was subject to numerous conditions including: (1) an award of the prime contract to FCi; (2) the government's approval of CGI as a subcontractor; (3) inclusion in the prime contract of CGI's statement of work and; (4) "[m]utual agreement of the parties . . . to the statement of work, financial terms, and reasonable subcontract provisions."

         Continuing, Section 5.1(8) provided that the teaming agreement would expire 90 days after an award of the visa contract to FCi, if the parties could not agree on the terms and conditions of a subcontract. In Section 2.7, the parties acknowledged they would bear their "own respective costs, expenses, risks and liabilities arising out of performance" of the teaming agreement. Section 8.3 stated there was no basis "for the sharing of the profits or losses arising out of the efforts of either or both of the parties, " and section 9.0 precluded the recovery of lost profits for a breach of the agreement.

         B. The Amended Teaming Agreement

         After three months of work with CGI, on December 6, 2012, FCi submitted a proposal to the State Department. FCi, however, did not provide CGI a copy of the proposal and, at the time of submission, FCi did not inform CGI the proposal allocated a 38% workshare to CGI. On March 8, 2013, the State Department notified FCi the proposal was competitive, but directed FCi to address certain deficiencies and submit a revised proposal by April 18, 2013. Based on the State Department's response, FCi informed CGI its workshare would have to be reduced in a revised proposal because the government required additional work to be provided to other subcontractors. Accordingly, CGI's workshare as a subcontractor could not exceed 41% because FCi, as the prime contractor, was required to have 51% workshare for the prime contract.

         CGI agreed to accept a 41% workshare for its continued participation in the revised proposal. To offset this workshare reduction, CGI requested that FCi allocate ten management positions for CGI employees working on the visa contract. FCi recognized that CGI's continued involvement was critical for the success of the proposal. In responding to CGI's request, on April 17, 2013, FCi's President, Scott Miller, emailed CGI's Senior Vice-President, Toni Townes-Whitley, assuring her "that our revised teaming agreement with CGI affirms our commitment to CGI providing 10 management/supervisory positions . . . . In addition, the agreement will reflect CGI's 41% total contract value work share." Based on these representations, CGI continued to cooperate with the revised proposal and executed an amended teaming agreement, with an April 17, 2013 effective date. Except for the provision concerning CGI's 41% workshare and the ten management positions designated for CGI, if FCi were awarded the prime contract ("post-award provisions"), the amended teaming agreement did not alter the parties' original teaming agreement.

         One day after Miller's email to Townes-Whitley, FCi submitted a revised proposal to the State Department. Contrary to Miller's representations in his email to Townes-Whitley, the revised proposal allocated only a 35% workshare to CGI and reserved all management positions for FCi.

          C. Post-Award Negotiations

         On August 2, 2013, the State Department awarded FCi the visa contract, but a competing bidder, Ikun, filed multiple protests with the government because it contended FCi was ineligible to bid as a small business. In the subsequent months, FCi and Ikun negotiated a settlement to avoid further challenges to the award. In part, FCi agreed to give Ikun and its affiliates work under the visa contract. Because of the settlement, the workshare FCi was willing to offer to CGI was reduced further. After the bid protests were resolved, the State Department requested FCi submit another revised proposal. Without CGI's knowledge, this second revised proposal provided CGI with an 18% workshare and FCi with a 75% workshare.

         On March 31, 2014, the State Department finalized the visa contract, offering FCi a base-year contract with four annual renewal options for a total value of $145 million. Following the contract award, FCi and CGI started negotiations for a subcontract. Initially, FCi offered CGI a 16% workshare and increased the offer to 22%. On June 20, 2014, as negotiations for a final subcontract continued, the parties entered a temporary agreement to allow CGI to begin working on the visa contract. CGI was paid more than $2 million for the work it performed under ...

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